Pleading and Proving the Essential Elements of Loans This appeal raises questions regarding the essential elements of recoverable loans, in particular how they should be pleaded and proved. Roman-Dutch law which governs such loans, simpliciter, contemplate two broad types of loans, namely, loans for use (commodatum) and loan for consumption such as loan of money (mutuum). This case concerns the latter category of loan, which is defined by Wille’s Principle of South African Law, (9th Edition by Francois du Bois) Chapter 31, pages 948-949 as a “contract in terms of which one person (‘the lender’) agrees to deliver something, or things that can be consumed by use to another person (‘the borrower’) for a certain period of time or to achieve a particular purpose with the intention that the borrower become the owner.” Walter Perera in his work, The Laws of Ceylon (2nd Edition) at page 619, describes such a loan as “a contract whereby one of the parties gives over or delivers to the other property or dominion of a certain sum of money, or quantity of things which perish by use, the latter binding himself to return as much of the same kind or species.“ It is an essential characteristic of such a loan that the borrower is bound subsequently to return to the lender, in the case of money lent, a sum of money equal to that lent, or, in the case of other fungibles, objects of the same kind, quality and quantity. The terms of the contract, in particular the duration of the loan and the agreed interest, if any, are therefore of paramount importance. Walter Perera, in his The Laws of Ceylon at page 619, observes that the contract of “mutuum is contracted not only by express words, but also tacitly by implication; so that when there is a doubt, mutuum is considered to have been contracted from the mere fact that mention has been made of money received.” He also cites Censura Forensis 1.4.4.49 for the proposition that “where a large sum of money has been given to any one without mention being made of the reason, the presumption in case of doubt is that it has given on loan for consumption”. As regards the borrower’s duty to return whatever is borrowed, Wille (supra) page 950, notes citing Grotius 3.10.6; Van der Keessel 3.10.6; Voet 12.1.19 that the borrower “must return the equivalent at the time agreed on. If no such time has been fixed, the borrower is not bound to return the equivalent immediately, but only on expiration of a reasonable period in the circumstances, after notice“. K. Balasingham, in his Institutes of the Laws of Ceylon, Volume 2, Part 1 at page 287 citing the same authorities as does Wille, observes that from this contact, “which is unilateral or only on one side, arises an action to the lender or his heirs against the borrower or his heirs to return a like sum of money, or quantity of the thing lent and of the same quality, and this after the expiration of the time limited by the contract, or if no time has been fixed then after a reasonable time to be determined by the judge.” From the above, it becomes obvious that the plaintiff in any action for recovery of loan has to establish clearly the terms of the loan, particularly its duration, and if no specific period of time is agreed upon for the return of the money or other thing loaned, that a reasonable time has elapsed after the advance of the loan, and a notice has been issued to the borrower demanding the return of the loan. With regard to interest, unless the rate of interest is expressly or by implication agreed upon by the parties, the lender is entitled to the return of only the sum of money or the quantity of other thing lent in the same quality. Particulars of all these terms have to be pleaded and proved. The failure to set out particulars of the cause of action or causes of action sued upon might give rise to difficulties in framing necessary issues of fact or even result in the dismissal of the action (Narendra v. Seylan Bank Limited [2003] 2 SLR 1). per Marsoof, J. in Lionair (Private) Limited v. Ceylinco Leasing Corporation Limited, SC CHC APPEAL No. 43/2010 decided on 2013.08.05
Posted on: Mon, 05 Aug 2013 12:54:50 +0000
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